How to Analyze General Obligation Bonds

This chapter discusses the basic analytical issues in evaluating the credit quality of general obligation (GO) municipal bonds that are issued by states and local governments. General obligation bonds are secured by the pledge of the issuer's taxing powers. More commonly the general obligation bonds of local governments are paid from ad valorem property taxes and other local general revenues. The analyst can make a generalization about the investment quality of the bond under review: after having determined whether the GO bonds are double‐barrelled or not, after having gathered the information about the issuer's debt structure, budget, revenue operations, and economic forces, and after having checked for the negative indicators. While all these elements together are important indicators of bond quality, each provides, if taken separately, only a single isolated element not in itself sufficient for full‐scale analysis.